Sometimes life gets messy. You spend more than you should one month and realize you cannot pay your credit card bill. Maybe an emergency expense puts you in a tight spot. Or maybe you simply forgot to pay your bill. Whatever your circumstances may be, not paying your credit card can have a negative impact on your credit.
One, two, or a few missed payments
Missing one payment is not the worst thing that can happen to your credit, but you do need to take steps to fix it:
- Call your creditor right away to explain the mistake. Often creditors are understanding if you do not have a history of being late on payments. Many will work with you to avoid or minimize the impact to your credit.
- Pay at least the minimum due as soon as you can. Creditors can report payments that are 30 days late to the credit bureaus. Paying before then is best.
- Be prepared to pay a late fee and interest on the unpaid amount, unless your creditor has made other arrangements with you.
Missing one payment can be easy enough to rectify, but what if you miss more than one payment? The consequences can be far more serious:
- You may be charged additional late fees and interest.
- Your interest rate could go up.
- Delinquent accounts that are 60 to 90 days past due will likely be reported to the credit bureaus, further lowering your credit score.
- Your account could get sent to collections.
It is also important to understand that credit mistakes affect credit scores differently. For example, late or missed payments can actually drop more points from a good credit score than a bad one. Knowing your score at the time of the delinquency can help you anticipate how much it might be affected.
Six months or more of missed payments
After six months (180 days) past due, your credit card issuer must write off the debt, sending your account to debt collections. The amount you owe increases as well because you will be responsible for six months of late fees and interest on top of the balance. You may also have to deal with aggressive debt collectors seeking payment.
If you truly cannot pay off your balance in full—including all the financial penalties incurred—then you could face lawsuits or a bankruptcy. Debt management is one alternative process that allows you to pay your debt over a longer period of time. Debt settlement is another option to tackle excessive debt by paying a lump sum portion of your debt and the rest being forgiven. No matter how you deal with your debt, being delinquent for six months or more will cause significant damage to your credit score.
If your credit card remains unpaid long enough, the statute of limitations becomes an important factor. Generally, the statute of limitations is a period of four to six years after your last debt payment. During this time, creditors and debt collectors can sue you or try to collect your debt. After the statute of limitations has run out, however, the debt does not automatically disappear. For instance, a persistent debt collector may even try to convince you to pay a time-barred debt. Being aware of the applicable statute of limitations may help protect your credit future from your past problems.
Mitigating credit problems
Before you reach the severity of the six-month mark, pay off what you owe as quickly as you can to avoid more interest, late fees, and damage to your credit. If you are a few months behind, contact your creditor to explore payment plan options. If you do have a delinquent account that went into collections, check to see if the information is old enough to be removed.
Lexington Law can help fix damaged credit and address problems on your credit report. Carry on the conversation on our social media platforms.